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Home Office is an Advantage, But Security Risks Remain

Would you work for a company that wants you to spend 40 hours a week at the office? Three years ago, you probably would have raised your eyebrows at the question. But times have changed — and the answer may not be as evident as it used to be.

The COVID-19 pandemic has dramatically altered how we work. Lockdowns and social distancing made the introduction of home office working inevitable for many companies. For a period, this was necessary to keep companies afloat without putting the health of employees at risk.

But home working has now become an expectation for many employees — and it is widely offered by employers to attract and retain workers.

To stay competitive, enabling a hybrid home-office model, full-time home working, or remote working is an increasingly popular strategy for organizations. But it requires the deployment of substantial security measures to limit risks in a digital environment that remains highly threatening.

Home Office: A Key to Attracting Professionals

Our research reveals that companies are using hybrid and remote working models to strengthen their competitiveness. From the employer point of view, offering a home office opportunity can improve employee satisfaction. In many cases, it also boosts productivity, resulting in better products and services and greater customer satisfaction.

Companies want to keep employees motivated — and hybrid working models are one way to do so. IDC’s European Industry Acceleration Survey 2022 found that 37% of the 1,500 respondents regard hybrid working as an external force that positively impacts the organization. Among all listed options, hybrid working won the most support from survey respondents.

Job seekers increasingly prefer companies that enable them to work from home on a regular basis. Many employers have supported this preference to avoid losing applicants. IDC’s 2022 Future Enterprise Resiliency and Spending Survey (Wave 6) offers confirmation: One-third of respondents cited offering a hybrid working opportunity as their top strategy for attracting and retaining IT professionals.

The survey also found that 29% of organizations regard offering a hybrid model as having the most impact of a range of strategies. Offering competitive compensation packages or designing inspiring workplaces were lower-ranked options.

Almost half of respondents said choosing the right strategy is crucial in the recruitment of IT professionals, particularly those who possess key skills that are in high demand.

Same Road, Different Stages

Companies are generally open to taking the necessary steps to satisfy the home office-related needs of their employees. But they are at different stages of introducing hybrid working models.

Around one-quarter of IDC survey respondents said company leadership had expressed interest in learning more about employee perspectives on hybrid or fully home-based working. One-quarter of respondent organizations have introduced short-term policies for it. Nearly one-third have invested in technologies to support ongoing remote and hybrid work based on feedback from employees, while 13% intend to maintain hybrid and remote working models over the long term.

Of course, not everyone has a positive view of home/remote working. But the Future Enterprise Resiliency and Spending Survey found that only a minority of enterprises face a situation in which the leadership and employees have completely divergent views on the subject.

What does home office working cost employers? IT investments, mostly related to infrastructure, are a major spend. IDC’s Future of Work Spending Guide reported that European companies are expected to spend $4.3 billion on remote team enablement this year. Increasing storage capacity and scaling VPN solutions are two of the most common upgrades that organizations implement.

Home Office or Remote Working?

The focus on VPNs illustrates that organizations must address the security risks of working from home. From the security point of view, there is a difference between home office and remote working. In the case of home office, employees are restricted to working in a specified location, their home, using equipment provided by the employer. In remote working, employees may work from anywhere and use personal equipment.

Remote working poses a much higher security risk. Unsafe networks, weak passwords, and unverified software are among the leading risks. People around the employee may also jeopardize the security of sensitive information. At home offices, unsecure networks, employee exhaustion, a sense of comfort and security, and distractions are among the risk factors. Security measures implemented by the employer can alleviate many of these concerns.

Increasing Focus on Security

After data management, cybersecurity is the second-ranked focus area for organizations. More than two-thirds of IDC survey respondents cited cybersecurity as a focus of skills acquisition and training. Having security experts at the company is essential for technology projects. Many respondents highlighted that IT security professionals remain in high demand, especially for key initiatives.

Security is indeed an increasingly crucial sector for investments, especially in the current era of cyberwar. IDC’s Security Spending Guide reveals that European organizations spent more than $42 billion on security technologies in 2021. A nearly 11% increase is expected in 2022.

The results of IDC’s European Industry Acceleration Survey 2022 align with this trend: 32% of respondents regard cyberthreats as an external factor that negatively impacts the organization. It is thus not surprising that 34% of respondents expect cybersecurity regulations to have a major impact on business in the next two years. In 2023, cybersecurity will continue to be among the top priorities driving digital investment.

There are many ways to boost an organization’s cyber-readiness. Among the listed security services in the Future Enterprise Resiliency and Spending Survey, security training received the most votes (33.6%). When working from home, employees leave the secure working environment provided by the office, exposing employers to greater risk of data breaches and cyberattacks.

Increased spending on cybersecurity, however, is not solely due to the risks posed by home and remote workers. Private and the public sector organizations may be targeted for cyberattacks no matter how many employees are physically present in the office. Because an inability to secure sensitive data poses operational and reputational risks, security budgets must not become victim to budget cuts by organizations trying to survive inflation and recession.

Home office has become widely popular and, for many, the default way of working. It remains to be seen whether the rising cost of living will force employees back to the office. But for now, labor market competitiveness depends on whether companies are willing and/or able to satisfy employee demands for home office. And this trend will continue to influence security sector spending.

While data has long been the lifeblood of businesses – critical to making the right decisions at the right time to drive revenue, experiences, and outcomes – connectivity provides the means to keep that data in motion. And, connectivity has become a priority as employees, businesses, and consumers increasingly look for digital resiliency, where digital experiences are supported by ubiquitous, reliable and robust connectivity. Enterprise network must scale to support the ever-growing volume of data coming from both inside and outside the organization.

When we discuss the Future of Connectedness, we recognize that there is no actual end state to connectedness. Rather, it is an evolutionary path that leads to improved agility, increased business flexibility, and more adaptability for organizations as markets and business conditions inevitably shift. Employees and customers have come to expect that any digital interaction with things, applications, processes, or other people is guaranteed no matter where, when, or via what medium they choose.

Over the past two years, the COVID-19 pandemic has been a key driver of change. The transition to hybrid work and more distributed workforces has created greater expectations from employees, customers, and partners for seamless anytime-anywhere digital interactions to mission-critical systems and processes. The convergence of physical and digital workspaces and storefronts and the evolution of smart spaces require business leaders to align technology, policy, and operations to drive agility and revenue.

As businesses look ahead to 2023 and beyond, they face added stressors – from inflation and economic uncertainty, regional conflicts, supply chain constraints, and a shortage of workers and staffing that align to key skill sets. While these forces play a role in key decisions, IDC data shows that 81% of organizations are still prioritizing connectivity programs. We expect companies to continue to leverage those investments to automate key processes, transform workplaces, improve customer experiences, and increase corporate resiliency. Connectivity programs will embrace 5G, edge, and cloud infrastructure and services to keep data moving.  More importantly, these programs will continue to improve efficiency and enable data to provide real-time insights to the business. As networks evolve and business needs scale or change, enterprise network and IT departments must align systems and processes. This will ensure business continuity, empower greater employee productivity, and help organizations quickly adapt to changing business environments and requirements.

IDC’s worldwide Future of Connectedness 2023 top 10 predictions are:

  • Prediction 1: By 2024, 75% of enterprises will leverage cloud-based APIs to create customer engagement applications that integrate UCaaS/CPaaS platforms with multichannel options to improve customer experience.
  • Prediction 2: By 2025, 50% of digital organizations will augment “cloud first” with a “wireless first” multi-access network fabric using diverse technologies for mission-critical and business continuity use cases.
  • Prediction 3: By 2025, only 30% of organizations will benefit from defined 5G use cases due to fragmentation and lack of leadership among connectivity, technology, and managed services providers.
  • Prediction 4: By 2026, 40% of enterprises will double investments in hyperconnected digital spaces to increase productivity, improve collaboration, and boost energy efficiency.
  • Prediction 5: By 2024, 50% of large enterprises will use a hyperscaler’s cloud WAN service within their network, either directly or indirectly, pushing telcos further toward the role of service integrators.
  • Prediction 6: By 2027, the metaverse will account for 70% of annual media traffic growth on the internet, where both consumer and business use cases will drive increased bandwidth demand.
  • Prediction 7: By 2023, 40% of enterprises will benefit from optimized operational efficiency, enhanced security, and reduced network costs by leveraging SD-WAN and security for cloud-managed networking and security.
  • Prediction 8: By 2024, 30% of enterprises will extend network attentiveness across all major IT teams (e.g., SecOps, DevOps, and AIOps) by expanding skill development, screening requirements, and NetOps interactions.
  • Prediction 9: By 2026, 40% of companies will lag in executing a resilient connectivity strategy due to budget shortfalls, as workplace transformation becomes the new normal for customers, employers, and partners.
  • Prediction 10: By 2027, 80% of G2000 enterprises will require LEO satellites to cover gaps in network coverage for remote, rural, and high-risk international locations.

Interested in learning more? Watch our on-demand webinar, IDC FutureScape: Worldwide Future of Connectedness 2023 Predictions.

Watch Webinar

Paul Hughes - Research Director, Future of Connectedness - IDC

Analyst Profile
Paul Hughes is a Research Director leading IDC's Future of Connectedness Agenda program. He is also a key member of IDC's larger Worldwide Telecom Research Team. In this role, Paul is responsible for research related to the future innovation and transformation of how data and connectivity impact people, things, applications, and processes used by enterprises and end users. Within the Future of Connectedness practice, he also publishes thought leadership on how the Connectedness ecosystem – including communications service providers, cloud providers network equipment vendors, IT hardware vendors, software vendors and systems integrators – must develop solutions to meet future technology needs of businesses and consumers.

As enterprises execute their transitions from digital transformation technology investment strategies to focusing on running digital businesses, a critical enabler will be the ability to innovate by developing differentiated and disruptive technologies. Data and data analytics will play increasingly important roles. In IDC’s view, companies that acquire the right data sets and apply the right analytics to derive key insights and build desirable capabilities will achieve desired business outcomes.

Our research supports this view. The rate of innovation in organizations with excellent enterprise intelligence was on average 2.5x faster than organizations with poor enterprise intelligence, according to IDC’s August 2021 Future of Intelligence Survey. Getting the data and analytics equation right, however, will require partnerships, rigor, efficiency, and ethics – all areas that are addressed in our predictions.

The COVID-19 pandemic demonstrated just how powerful digital technology and innovation can be in delivering resiliency, revenue, and opportunity to the enterprise in the face of crisis. Now, as we face additional global challenges, such as war, inflation, the threat of recession, and ongoing supply chain disruptions, enterprise relationships with technology will be more critical than ever. We anticipate the emergence of a divide between organizations that are able to scale development and delivery of digital innovation and those that can’t. Enterprises that deliver on digital innovation initiatives will emerge as leaders in their market sectors.

IDC’s 10 Future of Digital Innovation predictions are: 

  • Prediction 1: By 2024, the top five companies in each sector will be those that used technology to innovate their way out of a global crisis such as recession or supply chain disruption.
  • Prediction 2: By 2026, 10% of companies will successfully incentivize consumers to share closely held data to devise nontraditional offerings, improve customer experience, and grow market share.
  • Prediction 3: By 2024, 35% of businesses that build innovative algorithms to glean intelligence from unique data sets will deliver successful new product offerings and pricing models and tap new customer segments.
  • Prediction 4: By 2028, new efficiencies will allow developers to increase the share of time they spend on innovation from 25% of their development-related work to 75%.
  • Prediction 5: By 2028, recurring revenue from smart products will make up 65% of revenue for companies that sell “dumb” and “smart” versions of the same products.
  • Prediction 6: By 2026, 75% of market leaders will have systemic, structured digital innovation programs and investments that support ongoing iterative innovation, enabling growth, scale, agility, and resilience.
  • Prediction 7: By 2026, companies that share data with business partners to leverage their collective data sets for new revenue potential will grow revenue 10% faster than those that don’t.
  • Prediction 8: 85% of CEOs of the G2000 will demand senior leaders deliver data-driven insight into innovation activity including developer efficiency and business outcomes by 2025.
  • Prediction 9: In 2027, the share of non-technology-focused people in companies who will spend 10 hours or more a week contributing to digital innovation will grow from 5% today to 45%.
  • Prediction 10: In 2028, 15 large companies will make headlines for using digital technologies to manipulate customer experiences to spur upgrades and replacements.

Interested in learning more? Watch our on-demand webinar, IDC FutureScape: Worldwide Future of Digital Innovation 2023 Predictions.

Watch Webinar

Nancy Gohring - Senior Research Director, AI - IDC

Analyst Profile
Nancy Gohring is a senior research director, co-leading IDC's GenAI and Agentic AI Strategies program. Nancy covers big picture trends related to enterprise adoption of AI, including GenAI and agentic AI. Key research themes include business, organizational, and technology architecture transformation, in the context of AI and GenAI. As part of the Worldwide AI, Automation, Data & Analytics Research practice, Nancy supports a range of clients across the technology stack including hyperscalers, developer tool providers, enterprise application vendors, professional services organizations, automation frameworks providers, and infrastructure suppliers.

The ongoing wave of disruptions globally has underlined the importance of digital transformation (DX) in manufacturing organisations. It was evident during the height of the COVID-19 pandemic that digitally mature companies fared better in responding to disruptions than their peers with lower levels of digitalisation.

As the manufacturing sector globally faces continued uncertainty — with soaring inflation levels, energy crisis, raw material and component shortages, skills shortages and other supply chain disruptions — climbing the smart manufacturing maturity ladder is vital to ensure business continuity and make production more resilient in the long term.

In the same way, the dynamic business environment is providing opportunities that drive manufacturers to digitally transform their production. For instance, the push towards environmental sustainability and agile/remote production is an important catalyst for organisations to accelerate their smart manufacturing initiatives.

Smart manufacturing is defined as the continuous process by which enterprises leverage cyberphysical convergence and digital skills to develop the production capabilities to compete in the modern economy. It encompasses intelligent machines from machines and tools to collaborative robots, emerging sets of business applications enabled by cloud and industrial Internet of Things (IoT), technology enablers such as digital twins and AI, and other rapidly evolving technologies and standards that support smart production.

Assessing Your Factory’s Digital Maturity with the IDC Smart Manufacturing MaturityScape

The IDC Smart Manufacturing MaturityScape provides a framework for executive leadership, IT and production managers to identify the stages, critical measures, outcomes and actions required for organisations to evaluate and evolve their digital factory strategies. It offers a model to help companies know where they stand and take steps to drive their progress.

There are 5 stages in the IDC MaturityScape, from the least mature and capable Ad Hoc stage to the most mature and capable Optimised stage. At higher levels of maturity, smart manufacturing is a companywide strategic initiative and a major driver of competitiveness and innovation.

At this Optimised stage, companies recognise that mastering their factory floor processes enables them to become proactively disruptive in their market segments, both in delivering cutting-edge products and leveraging transformative business models that entail demand-driven manufacturing and agile production processes.

Addressing Challenges and Staying Ahead of the Game

While the benefits of digital transformation are immense, many companies face roadblocks and struggle to reach higher levels of smart manufacturing. Organisations need to have executives and all relevant stakeholders on board and build a culture that supports digital transformation. They also need to figure out how their operations can contribute to making their business model viable in a world of digitally enabled business ecosystems.

Companies at the lower stages of digital maturity must create a sense of urgency in the organisation and make a conscious effort to assess the technology opportunities available on the market and understand how they can be applied in their organisations. As they progress, it’s important to develop a clear road map with clear and measurable goals, and implement organisational and workforce transformation programmes to enable their digital transformation.

Companies at higher stages instead must enable business reinvention by leveraging smart manufacturing initiatives.

Companies at every stage of digital transformation must:

  • Empower the workforce by equipping them with necessary skills and capabilities to enable digital transformation. Workers need to feel engaged by knowing what digital transformation means for them and how they can best contribute to its success.
  • Focus on customers by ensuring that smart manufacturing initiatives are relevant and ultimately contribute to providing a competitive value proposition.
  • Acknowledge that DX is not a one-off stunt but rather a continuous and transformational process to build a transparent and responsive organisation.

Download the IDC MaturityScape Smart Manufacturing 2.0 to assess the state of your organisation’s smart manufacturing maturity across several dimensions and receive further guidance on how to progress and succeed at every stage of the smart manufacturing journey.

IDC’s European Manufacturing Summit 2022 is the perfect opportunity for manufacturing executives to discuss the key trends, challenges and opportunities that are driving smart manufacturing. It will also offer insights into how organisations can thrive and build resilience in an increasingly complex, volatile and disruptive world.

The IDC Manufacturing Insights: Worldwide Smart Manufacturing Strategies advisory service examines key challenges facing manufacturing companies, such as achieving operational excellence, enabling global manufacturing intelligence and ensuring production quality. It provides fact-based research on IT tools, strategies and best practices in manufacturing operations management (MOM) to meet business challenges, covering the entire spectrum of operational processes from digital factory and production scheduling through manufacturing execution and plant automation to asset management and plant sustainability.

The relationship between business and technology is changing. Listen to any boardroom discussion today, and it’s become clear that C-level executives no longer see IT as merely an enabler to already-made decisions. Instead, ongoing conversations are about how technology can create and expand strategic options. Likewise, business executives look to technology leaders to understand how digital can better deliver business outcomes.

IDC sees this new relationship between business and technology as “digital-first”. Today, 91% of Asia/Pacific including Japan (APJ) organizations have adopted digital-first strategies to transform themselves into digital businesses[1].

A similar view is reflected in IDC’s recent C-Suite Sentiment Survey 2022. 82% of C-level executives in Asia/Pacific say that digital business is a critical component of their overall corporate strategy. At least two-thirds of executives say that digital business initiatives play a significant role in achieving their top business objectives. These comprise (ordered in rank priority):

  1. Increase profits (93%)
  2. Reduce cost (69%)
  3. Improve operational efficiency (78%)
  4. Increase revenue (85%)
  5. Improve customer experience (80%)

This is the dawn of the digital business era. Flip through the annual reports of leading organizations such as Inchcape[2] and Midea Group[3], and one can see that technology is now integral to strategic plans. Moreover, as our research shows, more are joining their ranks in integrating business and technology.

Comparatively, the pandemic-driven digital acceleration we’ve experienced is just the tip of the iceberg. Today, technology brings new possibilities in business, operating, and organization model design that will radically change how businesses create and innovate value. It’s plausible that within the decade, we will see many more new businesses that do not exist today, and those that do exist today, cease to do so.  

Digital Products, Services, and Experiences as Growth Enablers

Using digital channels to engage, sell, and service customers has changed traditional sales and marketing economics. The opportunity to reach more people with reduced costs and faster turnaround time is our new reality. For businesses, long tails of underserved segments and emerging markets are now seen as economically viable through digital content, social media, e-commerce, and self-service digital assistants.

Also, customers love digital products and services’ simplicity and real-time nature. This opens countless possibilities for businesses to use data to improve customer experience (CX). By reinventing CX delivered through web and mobile channels, leading organizations aim to create empathetic experiences to broaden reach and appeal while strengthening customer advocacy.

The same survey shows that customer-facing executives’ top priorities are to expand new sales channels (CSO), improve brand awareness (CMO), and systemize customer feedback (CXO). In addition, they are looking to technology to help them achieve these outcomes. These executives are looking at technologies in data management and analytics (24%) and, e-commerce, sales and marketing automation (20%) as critical for adoption in the next 12 months.

Democratizing Data and Data-Driven Decisioning for Better Operational Efficiency

Digital technology has also made real-time transactions and data analysis more accessible. For example, IoT (Internet of Things), artificial intelligence (AI), and automation allow business data to be collected and analyzed as transactions and events. These can reduce the supply chain’s bullwhip effect, while providing more accurate information to augment decision-making for all managers.

Through digital ecosystems, decision-making can be more comprehensive and strategized. In fact, AI can support business planning with simulations, data search, and discovery to unearth courses of action and predict outcomes. It could also update the situation picture as new data and information emerge. Such closed-loop capabilities change the unidirectional nature of strategic planning to one of continuous optimization.

One example is in finance. The survey shows that CFOs’ top challenges include aligning capital allocation to long-term plans and inefficient budgeting/forecasting processes. Along the same vein, CFOs’ top priority is to optimize planning, budgeting, and forecasting to improve enterprise decision-making. To this end, more than half of CFOs see their role evolving to be more involved in technology decisions regarding finance, ERP, and analytics.

Coming Together as the Digital Dream Team to Realize Technology’s Business Possibilities

Despite these possibilities, the C-suite must better prioritize technology investments that synergize and scale well to succeed. As the relationship between business and technology evolves, so must the C-suite relationships change to reflect this symbiosis.

CEOs must take up the mantle of leading digital with the C-suite. Technology leaders must evolve, beyond technology integration, to be orchestrators of digital initiatives across the business. Yet today, only 9% of organizations have CEOs who personally lead digital initiatives while having CIOs as technology orchestrators. This is partly reflected in failures of digital initiatives driven by lackluster ROI, the C-suite’s lack of technology know-how, and the inability to scale due to organizational silos.

While cliché, leadership does matter in an endeavor as extensible as business transformation. IDC research shows that organizations with CEOs who champion digital initiatives have a higher project success rate and derive greater business benefits from digital initiatives.

The era of the digital business will further put this adage to the test.

[1] IDC Worldwide CEO Survey 2022: The CEO Tech Agenda in a Digital-First World — An APJ Perspective, Part 2: DX Approaches, Investments, and Digital-First Strategies

[2] Inchcape 2021 Capital Markets Day presentation

[3] MideaGroup 2021 Annual Report

Next week I am attending the Smart City Expo World Congress in Barcelona. I’ve have been an attendee, exhibitor and speaker at this annual gathering for many years now, and it’s great to see that in the past couple of years there has been a growing focus on inclusion.

Gone are the days when speaking about bright and shiny new tech toys was enough. Cities are eager to understand how to become truly people centric, including for people with disabilities. On the inclusion front, one topic that I’d like to hear more about at the Expo, in 2022 and beyond, is how to make cities autism friendly.

A Global Phenomenon

According to the World Health Organization, one in every 100 children has autism spectrum disorder (ASD). The US Center for Disease Control estimates it is one in every 44 in the US. If we consider a conservative estimate of one in every 100, then of the 4 billion people worldwide that live in urban areas, 40 million would have ASD. UN projections indicate that we’ll have 7 billion urban dwellers by 2050, meaning 70 million with ASD, assuming the prevalence of ASD does not change.

Autism is a challenging neurodevelopmental disorder. It’s a broad spectrum that includes people with cognitive, speech and motion disabilities, people with milder challenges but that still have a hard time speaking and socialising, and people with high-functioning autism (such as Asperger’s Syndrome), who can be like the genius “good doctor” in the TV series of the same name, but with the crying, screaming and lashing out when overwhelmed by stress, shiny lights, loud noise or unexpected events — stress that can be caused by hypersensitivity to noise, light, smell, touch and an inability to comprehend social interactions. Coping with ASD in a hyper stimulating environment like a city is like trying to share a file between a Mac and a PC in 1985. I know this because I have a beautiful eight-year-old son who has ASD.

Making the Urban Space and the Community Liveable

Making cities liveable for the millions of people that have ASD is a global inclusion imperative. Cities such as Aberdeen, Edinburgh, Liverpool and Glasgow in the UK; Phoenix, Mesa and Austin in the US; Prato in Italy; and tiny villages such as Clonakilty, in Ireland, are exploring how they can reimagine urban spaces and community services to become more autism friendly.

When it comes to urban spaces — both indoor, such as shops, theatres, cinemas, restaurants, museums, public transport, and outdoors, such as streets and parks — unpredictable noises, lights, smells and queues may cause sensory distress to people with autism. Adjusting ventilation, acoustics, heating, lighting, creating quiet spaces to recalibrate after a stressful moment, deploying visual signage that combines words with images, making available sensory guides and social stories to reduce the unexpected and making available small kits with “stim” toys can go a long way to improve liveability for people with autism.

When it comes to the community, lack of awareness about autism can lead to judgements. Autistic people talking to themselves in a library, for instance, can get unfriendly looks. As a result, people with autism and their families tend to isolate from social life.

It’s essential to educate people working in shops, restaurants, cinemas, museums, libraries, schools and healthcare facilities. Business owners need to understand how they can leverage the great skills that many autistic people can bring to the workplace, such as declarative memory.

Government institutions have a role to play to provide coordinated support across family allowance programmes, mental health services, job training and placement, and schools, without requiring people with autism and their families to explain their condition and needs at every point of interaction with the public administration.

How Technology Can Help

Technology is not a silver bullet. Cities have had enough smart techno solutionism. Autism is the least suitable area for cookie-cutter approaches because every person with autism is at a different place on the “spectrum”, with their own special characteristics and needs. But technology can help.

When it comes to urban spaces, using location-based intelligence, digital twins and other tools can help map areas of the city that are the least liveable for people with autism and plan alternative designs. Apps can be used to offer people autism-friendly sensory and navigation maps.

When it comes to the community, online training can help increase awareness. Apps can help communicate with people with autism who are not verbal.

Online services can be used to pre-book fast-tracking entry at certain facilities to avoid the stress of queueing. And public administrations across the city ecosystem should scale trusted data sharing to do a better job of coordinating public services that support people with autism and their families.

I look forward to hearing and learning more about autism-friendly cities at the Smart City Expo and beyond. My son and the tens of millions of people with autism deserve to be included.

Massimiliano Claps - Research Director - IDC

Analyst Profile
Massimiliano (Max) Claps is the research director for the Worldwide National Government Platforms and Technologies research in IDC's Government Insights practice. In this role, Max provides research and advisory services to technology suppliers and national civilian government senior leaders in the US and globally. Specific areas of research include improving government digital experiences, data and data sharing, AI and automation, cloud-enabled system modernization, the future of government work, and data protection and digital sovereignty to drive social, economic, and environmental outcomes for agencies and the public.

On October 13 and 14, IDC Retail Insights Team Europe joined AWS for a two days’ AWS London Analyst Tour to give first-hand examples of how technology enables innovation of the entire retail value chain, transforming retail fulfillment and physical store operations to better serve customer experience in real-time.

On day one of the tour, the analysts visited two fulfillment centers, Ocado’s CFC4 fulfillment center in Erith, and Amazon’s Tilbury fulfillment center (FC), while stores in Central London were the focus of day two with visits at Amazon Fresh in Hackney, Sainsbury’s in Holborn and Nike Town in Oxford CircusIn this post, we briefly summarize what we saw during the tour and why this is significant for the retail industry.

Automation for Efficient and Sustainable eCommerce Fulfillment: Day One, Ocado’s CFC4

On a cloudy Thursday morning, we left St Pancras for a one-hour minivan ride to Ocado’s CFC4 in Erith, East London. The site, a 600,000 square feet fulfillment center, is the company’s largest CFC globally and does stand out for the high level of automation that characterizes the facility.

Erith’s CFC4 is an outstanding example of the application of Ocado Smart Platform (OSP) in large-scale grocery distribution. OSP is Ocado’s proprietary technology that leverages a combination of AI, machine learning, robotics, IoT and data science to boost efficiency and flexibility in highly complex end-to-end eGrocery operations.

According to Ocado, OSP improves dramatically efficiency of fulfilment operations—99.9% fulfilment accuracy vs about 80% of other leading UK supermarkets—and ensures waste reduction by making operations more sustainable. Logistics and fulfillment operations play a huge role in meeting customers’ expectations, improving efficiencies and making operations sustainable, currently among the top retailers’ priorities.

That is why more and more retailers are deploying advanced analytics and automation to streamline logistics and fulfillment. Over 70% of retailers confirm their plans to adopt AI and cognitive for order orchestration and robotics for warehouse automation, latest IDC research reveals.    

As we visited the facility, what stood out was the large area dominated by a seemingly immense grid surface on which thousands of bots move around at lightning speed in apparently random directions. On the grid, bots travel at a speed of 4 meters a second, with 5 millimetres of distance between them.

Of course, their journey on the grid is not random. Bots are orchestrated, not autonomous, and operate through a proprietary RF solution designed by Ocado to ensure ultra-low latency which is needed given the high density of the bots on the grid and the speed at which they move around. Ocado partnered with AWS to run its thousands of OSP’s microservices in the cloud and ensure bots and operations orchestration.

The circa 3,000 robots are working non-stop for 20 hours a day, picking up to 2 million food items in a shift from 50,000 individual chilled and general grocery products. An average 45 items grocery order is completed in 5 minutes. Scalability and the impossibility of a single point of failure, both ensured by the modular nature of the OSP and its orchestration on AWS cloud, is the huge advantage of Ocado’s technology stack, which makes it suitable not just for Ocado’s operations but also to the requirements of other grocery retailers worldwide—including Groupe Casino, Auchan, AEON and Kroger, who partnered with Ocado to power their eGrocery operations.

Empowering Workforce in eCommerce Logistics: Day One, Amazon’s Tilbury FC

Sun was out as we approached Amazon’s FC in Tilbury in the afternoon. The Tilbury FC is one of the largest European Amazon’s TC, with 2.2 million square feet facility over 4 floors.

The FC is highly automated with extensive use of technology including robotics, AI and computer vision in all aspects of operations, all brought together and enabled by AWS cloud-native services. Over 2,000 people are employed at any given time in the facility, showing how despite the high level of automation, the employee remains key in retail fulfilment operations.

The FC provides a great example of augmented workforce by showing how technology is helping people to work efficiently. According to latest IDC Retail Insight research, 43% of retailers consider as a high priority to empower their staff by providing employee experience services, with the right technologies and tools to perform tasks timely.

We started our visit from the sorting stations, located on level 2,3 and 4. At this stage, staff pick items from boxes received from the inbound area, and put the products in yellow stacks based on their weight. Lights are guiding the staff by showing them where to place the item in the stack. The stacks are then moved around by an army of about 4,000 autonomous bots that fit under the stack and use AI and algorithms to sequence the tasks they need to perform.

QR codes printed on the floor are scanned by bots’ cameras and sensors to make them find their way around the massive facility area. While bots are fully autonomous and not controlled by humans, employees in control areas—workstations that look like bank’s trading rooms on which operation flows are shown on numerous displays—overlook every aspect of the process and alert colleagues on the shopfloor if any issue arises.

The next step is the picking area, in which staff collect items from the stacks and place them in black boxes, or totes, in a reverse process. The products are picked in sequence, so at this stage, the staff is not putting together a single order, but rather an aggregate. The boxes are then placed on spiral conveyor belts that move the totes down to the ground floor to the packing stations, where employees pick items from the totes and place them in pigeon-hole wall units, in which each hole corresponds to single customer orders.

On the other side of the wall, staff members pick items from the holes, pack them in single orders and put barcodes on the boxes for identification.

In the last mile of the process, the boxes are placed on a conveyor belt in the slam area, where robotic arms scan the labels and check if the weight of the box matches the content the label describes – if not, the box gets expelled from the belt for a member of staff to check it up. At the end of the conveyor belt, employees pick the boxes and place them in containers that are forklifted on outbound trucks to be taken out of the facility to sortation centers closer to the end shopper for last-mile delivery.

Unleashing the New Role of the Physical Store: Day Two, Central London Stores Tour

Hailed by another cloudy morning, day 2 focused on the application of technology in physical store environments to deliver more engaging, frictionless, shopping journeys and improve the customer experience. The physical store remains crucial in omnichannel retail, but its role is changing as the brick-and-mortar store becomes increasingly connected and integrated with the entire omnichannel experience. The visit offered great examples of how the role of the physical store is evolving in the context of today’s omnichannel shopping complexity, as we cover more in-depth in IDC PeerScape: Practices to Enable the New Role of the Physical Store.

We started our tour at Amazon Fresh convenience store in Hackney, one of the most recent additions to Amazon’s autonomous stores network in London, and continued the morning with a visit to Sainsbury’s first autonomous store, Smartshop Pick & Go, in Holborn.

The two stores deploy AWS technology—cameras, sensors, AI, and computer vision— to offer a fully automated grocery shopping experience that removes any possible point of friction, making the trip to the shop quick and effortless. Shoppers can scan their app to be identified as they enter the store, pick up items from shelves, and walk out without going through checkouts as the technology detects shoppers’ purchases and charges them accordingly through their app.

We ended our tour with Nike Town in Oxford Street, the company’s flagship store for the UK, for an example of what experiences technology enables in non-grocery physical store shopping. While with the grocery stores priority was given to reducing frictions, the focus of the application of the technology in the sportswear and lifestyle brick and mortar retail store rests on the personalization of the customer journey and in merging digital and physical.

The Nike App is the interface that enables the shopper to access personalized offers, benefits, and experiences, such as Find and Research, which enables shoppers to reserve an item on the app for in-store collection, Nike Scan, through which shoppers can scan barcodes on the item to access product information such as sizes and color availability and request store staff to try the item on, and Triggered Reward, which sends shoppers personalized alerts on exclusive promotions based on their location in the store.

Key Takeaways: Learning Points from the AWS London Analyst Tour

What we saw during the AWS London Analyst Tour are significant examples of how technology is instrumental for retailers to streamline future-proof omnichannel retail operations. As IDC’s recent survey results show, over the next two years retailers plan to invest in incremental and emerging technologies to improve new customer loyalty mix and CX personalization, enhancing sensory and immersive commerce.

At the same time, the Tour confirmed how leading retailers are already preparing for the future of omnichannel retail. Ocado showed us how to drastically increase efficiencies and pursue sustainability goals through clever automation.

Amazon reminded us that automation and AI need to empower the workforce, as staff remains key to navigating the complexity of today’s omnichannel fulfillment. Finally, the visits to Amazon Fresh, Sainsbury’s and Nike Town are significant examples of how to transform the physical store to make it a central piece of the new omnichannel customer journey.

Since we last reported on IT inflation in June, the situation has evolved as both buyer and supplier behaviors have adapted to the new reality that inflation is most likely here to stay.  The reasons for the price increases may be changing, as well as the areas of IT most impacted, but navigating rising prices for IT supplies, services and talent remains a challenge as we finish 2022.

Hardware

“Technology buyers have now had a full budget year to adjust to the reality of rising costs.  What began initially as COVID-related supply chain disruptions coupled with COVID-related demand for remote work technologies soon erupted into huge price increases for key IT components such as CPUs, storage, and cabling,” says Chris Murphy, VP for IDC’s vendor benchmarks.  Looking back into the Summer of 2021, this was the start of the first IT hardware increases lasting into first half of 2022, a period with 20% price increases on client devices and 15% on servers, storage, and networking respectively, as vendors could no longer absorb rising component costs which kept prices relatively stable from the start of the pandemic early in 2020.

Now entering the Fall of 2022, our review of hardware list pricing history and recent transactions with customers show that hardware price increases have been minimal. Stability of hardware prices is a positive trend but not a full correction to the normal price dynamics of hardware in which prices decline as a hardware generation ages. Much like used cars holding their value, the cost of technology as measured by performance or capacity is stable. Last year’s hardware offerings continue to sell for roughly the same price this year, with newer generation hardware costing more, therefore upgrading hardware with newer technology still costs more that pre-COVID. The net effect is that IT budgets are still being stretched by the cost of hardware. Stable prices are an improvement from earlier this year, but a hardware market without price decreases is still out of the ordinary and costing technology buyers more of their IT budget.

Software

Unlike hardware, software costs are not influenced by supply only by demand. During the height of the pandemic, key software categories led the transformation to remote work, leisure and learning and price became no object for many technology buyers who needed to enable these solutions. As the market moves past COVID, software vendors in most categories have found a way to extend user acceptance of higher prices. The race to subscriptions is accelerating and many vendors have discovered new ways to influence conversion like requiring a subscription over perpetual licensing for portability to the cloud. Annual subscription terms cost up to three times higher than a software maintenance renewal, and therefore subscription conversion provides vendors in most cases an automatic increase in annual revenue from a customer.

Subscription licensing and its outgrowth into PaaS and SaaS-based implementations shifts pricing power to the vendor. A user can no longer waive support and continue to use their perpetual licenses or seek out a lower cost third party software support provider. Vendors who have wooed customers into their PaaS platforms with low cost or free services to create applications and integrate their data, are now capitalizing on the “stickiness” created. Users can no longer separate and shop for the most economical hosting options for infrastructure.  Renewal discussions have a clock that runs in the vendor’s favor and comes with poor choices for migrating to any near-term alternatives if discussions fail to achieve user goals.

For these very reasons, private equity interests have accelerated their push into software.  Large conglomerates Broadcom and the newly formed Cloud Software Group (Citrix/TIBCO merger) will continue to capitalize on user software technology setups that are difficult to abandon, and these conglomerates are trying to make it even more complicated to negotiate on price by creating bundles and dependencies between solutions to achieve the best pricing.  “Recent customer experiences show flat installed base renewals running up to 400% higher in price among these conglomerates, and that will incent the investors of these conglomerates to further tailor price extraction methods and find more acquisition candidates to move to their umbrella,” says Neil Stewart, a Senior Research Director in IDC’s Sourcing Advisory Service.

Even those software vendors not part of a large conglomerate realize that the environment is ripe for raising prices whether it is just feeding off the bandwagon effect of the conglomerates, the expectation of future inflation or the resignation among users that software will cost more. Most software historically has around a 3-4% annual increase in price at renewal, increases are not new, but in 2022 software vendors are pushing this range to 6-10% price increases.

Labor

AWS recently raised consulting day rates by 7-8%, Adobe increased pro-serve rates by 20% and plenty of more examples exist as the cost to deliver professional services continues to rise due high demand for this service and a corresponding critical IT skills shortage. Will demand for these services continue or is the knee jerk reaction to build the new post COVID technology infrastructure that is now nearing completion. Recent rounds of layoffs within the high-tech community may alleviate labor shortages, but their focus will be on internal operations. The security or Kubernetes expert is expected to remain in high demand.

Infrastructure as a Service

Following both general component price declines and increasing operational efficiencies gained by hyper scaling, cloud computing services have a history of average decline in price. This trend downward in price eased late in 2021 to where we are at present with most of the cloud providers now enacting price increases across their offerings as they are not immune to higher component, labor and energy costs no longer have as steep of an efficiency curve as their businesses have matured.

Advice to Technology Buyers, Can You Wait?

This very well may be “peak market” from a technology cost standpoint, no category hardware, software, labor nor services is immune to increased cost. Being selective on new installations, expansions, renewal terms and projects conserves limited IT budgets and acts as a hedge that markets work in cycles and buying conditions may become more favorable soon. Instead of doing a storage upgrade now while storage controllers are scarce and generally reserved for new installations, wait, and buy a complete storage replacement later. 

For software, finding savings might be trickier as software vendors are having their moment to shine with higher prices, but besides working closely to optimize usage to spend, many users are shortening renewal terms from 3 year to 1-year terms. This protects cash flow and bets that windfall price increases seen at present will not last if the economy changes for the worse as forecasted, making next year’s renewal more favorable to the buyer. This can be a risky move as 1-year terms can cost up to 30% more than locking into a 3-year term, but today’s market shifts the focus to the short-term given the mixed outlook that may bring relief to today’s exorbitant pricing, so why lock in large price increases now?

Our advice for professional services is similar, demand is still high for these services but there is plenty of good reasoning pointing to a return to a normal spend on digital transformation projects without the accelerators brought by recent macro trends. Thus, slowing down the implementation of new projects or waiting until next year when the labor market offers more availability may benefit IT budgeting.

For many if not most technology buyers using a cloud first approach, IaaS remains a runaway cost item.  Accurately forecasting cloud consumption costs is a daunting task, and the first step to controlling costs is identifying costs by investing in spend management tools that specialize in the cloud. Incentivizing internal users to be cost efficient, using cloud optimization tools to buy spot instances, scaling resources to avoid costly overprovisioning will help, but one of the clearest ways to save is to keep an open mind to all possibilities. “We have seen moving some workloads back to on-premise or managed off-premise infrastructure result in savings of one-third the cost of running equivalent workloads in the cloud,” say Freddie Diaz of IDC’s Sourcing Advisory Service. In fact, many vendors now offer robust hybrid cloud solutions that still offer the flexibility of the cloud but reside on-premise (i.e. Dell APEX, HPE Greenlake) and we find these solutions priced well below the equivalent cloud solutions and only 10-20% more expensive than a traditional on premise capital purchase.

For more information and guidance on IT spending, IDC’s Sourcing Advisory Services provides clients with the world’s leading price benchmarking service supported by a core team of sourcing experts who help IT buyers drive new savings and efficiency across any of their technology purchases & partnerships, spanning all categories across IT hardware, software, services, and labor rates. Click the button below to access IDC’s Sourcing Advisory Services.

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Brian Clarke - GVP, Research - IDC

Analyst Profile
Brian Clarke, Group Vice President of IDC's Pricing Evaluation and Sourcing Advisory Services, is responsible for managing a global portfolio of research services examining the value of information technology equipment, software and services. Mr. Clarke developed several innovate research practices and tools that bring an understanding to complex and ever changing pricing structures resulting from digital transformation. Mr. Clarke consults on pricing and financing strategies to IT manufacturers, and reviews purchasing, contracts and provides deal analysis to technology buyers. Recent projects include helping software vendors evolve from perpetual to cloud based pricing, and providing technology buyer's with guidance on how to measure and compare on premise costing with cloud and other utility-based solutions.

Retail has undergone a huge transformation in the past few years. It’s also still under pressure from external forces and changing buyer behaviour. With buyers changing how they shop and why they shop, retailers need to ensure that their brand purpose aligns with their customers and enhances their internal operations. At the recent IDC Retail Summit, IDC analysts and industry leaders got together to discuss how retailers can operate in a purpose-led world.

Watch IDC’s 2022 Retail Summit on demand here.

The Need to Bridge the Gap Between Online and Offline Retail Experience

The pandemic has forced many changes in retail and now, with offline beginning to expand again, retailers need to bridge the gap between expectations created by online experiences.

Customers are used to a certain experience online, and this can cause friction between their online experience and their experience in brick-and-mortar stores. Technology can help bridge this gap, bringing aspects of the online experience such as personalisation, rewards and speed into the offline experience.

A huge part of bridging this gap is identity management. Identity management isn’t just about security. As digital shopping experiences pick up, retailers can gather more and more data on buyer behaviour. Customers and the way they buy are changing quickly. Understanding who your customers are and how they are buying is important to ensure your company can adapt to a changing buyer.

Digital Transformation Needs to be Practical

Digital transformation is a key part of retailers’ development, and is key to bridging the gap between offline and online experiences and communicating and demonstrating brand purpose. But with all change, it must be effective. Technology that is implemented must be useable and easy to adopt, for employees and customers. Incremental changes that bring value without too much disruption are ideal.

Technology can be a bridge between stores, HQ and employees. Implementing technology as part of digital transformation can help break silos in retail organisations and drive innovation and collaboration by streamlining processes. It can empower teams in stores by giving them information and connecting them to the wider team. It can provide HQ with real-time store data and ensure that teams that work in all parts of the retailer work together effectively and efficiently. Collaboration and communication are vital. When introducing new programmes, tech or functionality, being able to communicate why is important across the organisation. Retailers’ key personas and employees need to understand business priorities but also feel that changes are there to help them and build towards achieving their goals and brand purpose.

Brand Purpose Impacts Everything from Buying Decisions to Employee Productivity

Purpose is becoming increasingly important to brands, but especially those in the retail sector. Customers are becoming more conscious of the social, ethical and environmental impact of the products they buy, and purpose is now part of many customers’ buying decisions.

Customers have expectations for a brand or company experience, not just for the retailer itself but for the whole supply chain. While some of those expectations might not be realistic, retailers have to ensure that their brand purpose is as much a part of their messaging as product information.

Brand purpose is also important for employees. A clear brand purpose that aligns with the products sold is effective in both recruitment and in creating a strong company culture. A strong company culture impacts productivity and improves the customer experience. A company purpose that reflects the core values of your staff and products is now crucial.

Purpose connects value for retail optimisation. It defines the what, the why and the how of a retailer’s business, and it is one of the most influential connectors for retail proceedings and a powerful facilitator of operation and process optimisation.

Retailers are operating in a shifting environment. Purpose is key to ensuring they continue to align with their customers. It also promotes internal coordination and the drive towards an aligned and connected organisation that delivers value. It enhances performance and creates value. This is why, of all the topics discussed at IDC’s 2022 Retail Summit, purpose stood out.

For more information, please watch IDC’s 2022 Retail Summit on demand here. For more insights and key takeaways from the summit from IDC Retail Insights analysts, see Retail Operations in a Purpose-Led World: Key Insights from the IDC European Retail Executive Digital Summit 2022.

For more on our coverage of the retail sector, please visit our website.

Agile development empowers teams with many benefits but also presents challenges around managing and measuring its effectiveness. The way to resolve these is Function Point Analysis.

From business impediment to business enabler, IT development has come a long way since Agile has become the favored practice. Now empowered with speed and responsiveness, organizations have left the days of slow, cumbersome, inflexible, and unresponsive practices behind in the dust. Instead they’re able to support business needs and experience better alignment with changing business environments better than ever before.

It’s easy to understand why Agile is experiencing a strong increase in adoption; as companies become more nimble to embrace the pressures they’re facing in digital transformation, IT development is able to respond aggressively to evolving competitors and exploit markets more easily. But these benefits rival the frustrations on the management side of Agile teams. The nature of Agile makes it so that IT has lost visibility and scope control while the business has lost predictability. While Agile might make teams fast and responsive, businesses don’t know when projects will be delivered, and quality of delivery is often poor.

This is due to story points. Story points is a relative and subjective effort measurement that allows teams to estimate how much work of a certain item is required compared to a certain reference story with a fixed number of points. Story points can be used as an assessment method within a team. But how do these points happen? In an Agile Scrum environment, productivity is often associated with delivered story points, often expressed in Velocity as an estimation unit. The problem is that story points are not standardized, and productivity based on story points means nothing outside of a team itself. Even within a team, story point deflation is always lurking.

Is it even possible to objectively measure productivity? This blog will show that using a ratio scale is the way to objectively measure productivity as proven by IDC Metri’s years of helping clients turn around this common challenge. Management information can be established through a ‘unit of measurement’, bringing answers to long-sought after questions such as which teams are performing well, which teams are not performing so well and when is which functionality ready at what cost?

If you want to use productivity to compare teams, departments, organizations and/or suppliers, or the market, it’s a necessity to use a standard measure of output. Even when this data is about trends on your teams, this insight creates a unified and common view.

For years IDC Metri has been offering function points to create this factual view to clients. Function point analysis was developed in the 1970s to determine the productivity of development teams when it was impossible to do this by counting lines of code. By making function point analysis independent of the technical implementation (programming language, architecture, etc.) and the development method (Waterfall, Agile, etc.), it’s also relevant today and fits into the solution that Agile teams and management need to resolve the challenges that story points create. In short function points are the de-facto standard to express the amount of functionality in a standardized size unit.

Several manual standards are available and one international ISO standard is available for automated function point analysis: ‘Automated Function Points (AFP)’. IDC Metri prefers to use automated measuring of functional size but also employs certified analysts who can manually measure when automated measuring is not possible for whatever reason.

To measure the size of the output of a team, it is also important to not only look at the added functionality but also at the changed and removed functionality. IDC Metri uses automated measuring of ‘Enhancement Function Points (EFP)’ to measure how much functionality has been added, changed and/or removed during a sprint, release or project. This gives the ‘Project Size’ in EFP, a standardized method to measure the output of a sprint or release.

While Agile is hard to measure and manage for full value, the IDC Metri proven approach of using function points transforms a team-driven, fast-moving, rapid iteration process that evaluates progress on qualitative measures into something that can be quantified and predicted.